Deal Abstract

Two sided marketplace for investors to buy revenue from small businesses. Pipe for small business. But is it venture backable?

Financials (VRB)

Question	Notes
1. Fundraising Target?	$950000
2. Fundraised So Far?	$61200
3. Pre-Money Valuation?	$15000000
4. Previous Year's Annual Revenue	$123427
5. Previous Year's Annual Net Income (+ Profitable, - Burning Cash)	~$-167890

Source

The 6 Calacanis Characteristics ("Sow Passion, Not easy mediocrity", or S2 P6 N18)

Criteria	Yes/No
1. A startup that is based in SV?	False: Los Angeles, CA
2. Has at least 2 founders?	True: Two
3. Has product in the market?	True: Revenue generating
4. 6 months of continuous user growth or 6 months of revenue?	False: Declining revenue from 2019 to 2020
5. Notable investors?	False: No one I recognize
6. Post-funding, will have 18 months of runway?	True: Needs $250k to get 18 months of runway

Source

The 7 Thiel Questions (Every Time Man Profits, Don't Dismiss Serendipity)

Question	Score	Notes
1. Engineering?	2	Marketplace
2. Timing?	3	Good timing, reminds me of Pipe: https://techcrunch.com/2021/03/09/this-pipe-ing-hot-startup-just-raised-50m-to-be-the-nasdaq-for-revenue/
3. Monopoly?	1	Pipe to me is the big player in this space
4. People?	2	Team seems fine but not seeing any major unfair advantages here
5. Distribution?	2	As mentioned with pipe, needs unfair access to accredited investors
6. Durability?	3	Very defensible marketplace if they could build both sides
7. Secret?	2	Providing Pipe like services to non venture businesses is an outsized opportunity

What has to go right for the startup to return money on investment:

1. Build both sides of the marketplace; 2. Consistently underwrite risk more efficiently than banks; 3. Eventually branch into unaccredited debt/investment

What the Risks Are

1. Revenue declined; 2. Small businesses don't fit the Pipe revenue forward model; 3. Other businesses will scale faster to eat this lunch

Bonus Muhan's Notes

Very cool to see this category of business. Going to ask founder questions to get more clarity.

Updates

This is where I’ll post updates about the company. This way all my notes from offering to post-offering updates will be on one page.

Review these deal memos every time the startup raises a new round

Test if original thesis still applies

Notice trends in how you think

So, did I invest?

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Other thoughts, questions, comments, or concerns? Write me at mail@muhanzhang.com and let me know.